| Commentary

205 Effect of redemption

| Commentary

205 Effect of redemption

Once shares are redeemed, they are treated as cancelled and this reduces the company’s issued capital by the nominal value of the shares redeemed1.

Where redemption is made wholly out of the company’s profits, the company must transfer the amount by which the company’s issued share capital is diminished on cancellation of the redeemed shares to a reserve, called the ‘capital redemption reserve’2. Where the shares are redeemed wholly or partly out of the proceeds of a fresh issue, and the aggregate amount of the proceeds is less than the aggregate nominal

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